Nomura says “Midterm elections can’t save tech stocks; only the Fed can” — this lays bare the macro trump card

These past few days, every analysis has been searching for the cause of the selloff: a Democratic sweep, concerns over AI regulation, profit-taking. But before the election, Nomura strategist Naka Matsuzawa made a pointed remark: the midterm election results would have far less impact on stocks than the market expected, and the only catalyst that could truly end the tech stock slump was the Fed stopping its rate hikes.‌

What this does is put the issue into perspective. Elections are political events, and political events change “regulatory expectations.” But for tech stocks, especially high-valuation growth stocks, interest rates have always been the anchor for valuations. The Fed held rates steady at 3.75% to 4% at its November meeting, but Nomura noted that market pricing for additional rate hikes had fallen from nearly 90 basis points before the election to slightly above 50 basis points, while the probability of a December hike remained at 82%. The near-term rate-hike path had not changed. Cleveland Fed President Hammack and Richmond Fed President Barkin both sent hawkish signals around the selloff, suggesting that further hikes remain possible.‌

What does this mean? It means the valuation pressure facing tech stocks won’t be lifted just by changing Congress. The longer rates stay high, the lower the discounted value of future earnings, and the greater the pressure on high-P/E assets. Nvidia’s fall from a 45x PE to a 25x PE is essentially a valuation repricing driven by the interest-rate environment.

But it’s not all bad news. Nomura also noted that the market has begun to expect the Fed may pause after two more rate hikes, with the expected terminal rate falling to 4.27%, supporting long-term bonds. If this expectation gradually plays out, the peak in interest rates will become clearer, and so will the valuation floor for high-valuation growth stocks.‌

For traders, this means two things. First, watching changes in the Fed’s language is far more useful than watching the election results. Second, any rebound after the selloff is likely to be fragile if it happens before signals of a “Fed pivot”; it may only prove sustainable if it comes after those signals.

The topics for Gate’s Stock Chat Season aren’t limited to individual stocks—you can also write about macro views, sector rotation, and the impact of interest rates on valuations. Sign up to receive a 10 USDT trial voucher, include #Gate股票畅聊季 in your post, and share when you think the Fed’s “pause” will finally come.

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